Why Context Influences Preferences Elicited with Willingness to Pay Less Than Preferences Elicited with Choice

Normative theories assume that people have stable preferences across logically equivalent decision contexts. Preference reversals, cases where preferred options vary across decision contexts, violate this assumption and suggest that preferences are constructed during the decision-making process. We contribute to this literature by identifying a boundary condition for these context effects. We theorize that monetary preference elicitations, such as willingness to pay (WTP) and willingness to accept (WTA), evoke comparisons to external out-of-context standards, such as the market price of similar goods. These out-of-context comparisons should weaken the influence of the local context. Our theory predicts that context effects will be weaker for (1) monetary versus nonmonetary preference elicitations (e.g., WTP/WTA versus choice) and when (2) options differ on attributes highly correlated with market prices of similar goods and services. Across 22 studies, we find support for these predictions using three canonical decision context effects (intertemporal tradeoffs, framing effects, and attraction effects), incentive-compatible and stated preferences, and different response formats (binary, continuous, and mixed). Preferences for a wide range of goods and services—including baked goods, apartments, and lotteries—exhibit these patterns. Our theory explains substantial variance in context effects and offers testable predictions for when context effects will arise in research and practice. This paper was accepted by George Wu, behavioral economics and decision analysis. Funding: This work was supported by Connaught Fund. Supplemental Material: The online appendix and data files are available at https://doi.org/10.1287/mnsc.2023.00913 .